The United States Commodity Trading Futures Commission announced that a North Carolina federal judge has approved a consent award against a Florida couple and their company in a foreign-currency trading Ponzi scheme that took in over $20 million from investors. Gary D. Martin and Brenda K. Martin (the "Martins"), of St. Augustine, Florida, and their company Queen Shoals Consultants, LLC, were issued permanent trading and registration bans, along with orders of full restitution to defrauded investors and a yet-undetermined civil monetary penalty.
According to a complaint filed by the CFTC, Sidney Stanton Hanson was accused of running several entities, including Queen Shoals, LLC, that fraudulently solicited $22.5 million from investors for the purported purpose of trading foreign currencies. Prospective customers were promised annual returns ranging from eight to twenty-four percent, along with an additional 1% to investors who rolled over their IRA balances. Hanson, who pled guilty earlier this year to charges of securities fraud, mail fraud, and money laundering, did not disclose to investors the use of more than 30 "consultants" who were paid referral fees in return for funnelling customer funds to Queen Shoals.
Authorities alleged that the Martins operated as so-called "consultants" for Queen Shoals. Through their company Queen Shoals Consultants, over $20 million was solicited from investors through in-person solicitations, written materials, and a website. Prospective investors were told that the Martins and Queen Shoals had extensive experience trading foreign currency, which was in fact false. All funds raised by the Martins were then turned over to Hanson, who paid the Martins at least $1.44 million in undisclosed referral fees.
In reality, the foreign currency trading operation was an elaborate Ponzi scheme that engaged in minimal currency trading. Heavy losses were incurred in the little forex trading that did occur. The remainder of the funds taken in from investors were used to pay quarterly interest payments to existing investors, referral fees to so-called "consultants", and to sustain Hanson's lavish lifestyle.
In April 2011, Hanson was sentenced to twenty-two years for his role in the scheme and also ordered to pay more than $33 million in restitution.
A copy of the CFTC Complaint is here.
A copy of the SEC Complaint is here.